To attract more foreign direct investment, Slovenia needs to provide a stable and competitive regulatory framework, ensure transparency and improve human resources management where the key is to motivate manpower financially and through organisation, found a panel debate held as part of the FDI Summit.
Iztok Seljak, managing director of Hidria Holding, the parent company of the eponymous industrial group, noted that investors are attracted by the country’s market-growth size or low labour costs. “Slovenia has neither,” he said.
In terms of value added per employee, at around €53,000, Slovenia ranks somewhere in the middle in the EU. “We’re stuck in the middle, a dead alley,” he said, adding that the country needed to enhance know-how and innovation and look for other opportunities to increase value added.
One of the solutions is attracting quality FDI. Seljak offered Hungary as an example: decades ago the country did not have its own automotive industry, while now it generates more than 30% of the country’s GDP. Thanks to FDI, Hungary is a leading global lithium-ion battery manufacturer, accounting for half of Europe’s output.
Matevž Frangež, a state secretary at the Economy Ministry, said the government would like to make the Slovenian economy more competitive not only for FDI, but more broadly. Slovenia comes top in terms of cross-border cooperation, but only ranks 109th when it comes to issuance of building permits.
Speeding up permitting and reducing red tape are two areas that need to be tackled as a priority. The steps should help the country to increase value added per employee, which is now just half of Germany’s or Austria’s.
Darja Figelj, managing director at Interzero, part of the Austrian multinational active in recycling, talked about challenges. She has been at the helm of the company for eight years, during which time three different governments and five environment ministers have changed in office and there have been seven or eight different proposals of environment legislation.
Slovenia has the potential to become a regional hub for FDI, but it needs to tackle the regulatory framework and ensure stability. One thing that needs changing is the tax system. “If we want to reward good workers by raising their pay, the state will take more than half of the rise. This is killing competitiveness in Slovenia,” she said.
Uroš Kušar, managing director of Brinox, a company providing solutions and equipment for the pharmaceutical, biopharmaceutical and food industries, spoke about the need to tackle the labour market and to motivate people to work and increase their productivity.
One thing that needs to be looked at first is whether there may be too much talk of quantity of the labour force and too little about the quality and special skills of the labour force, said Kušar.
Aleš Poljanšek, general manager of ebm-papst Slovenija, agreed. He cited data showing that Slovenians work only 37.5 hours a week, which he said was less then elsewhere, especially if the country wants to compete at global levels with regions such as Asia.
Before the panel, Doris Hanzl-Weiss, an economist from the Vienna Institute for International and Economic Studies, talked about the economic and social impact of FDI in Slovenia, Eastern Europe and South Eastern Europe.
The region has seen a high FDI inflow in recent decades, in particular the Baltic and Western Balkan countries. The Western Balkans has been gaining ground in FDI recently, also in the wake of the Covid-19 pandemic, which has shaken up supply chains globally.
Slovenia has the lowest share of FDI in GDP compared to other countries in the region, which Hanzl-Weiss was usual for more advanced economies.
The FDI Summit is hosted by the Ljubljana School of Economics and Business in cooperation with the Slovenian-German Chamber of Commerce and The Slovenia Times in a bid to help “create conditions for an open business environment that attracts foreign direct investment”.
The afternoon part of the event focused on staff shortages and Mojmir Mrak, professor at the Ljubljana School of Economics, discussed the situation facing the Slovenian economy in light of the growing geopolitical risks. A panel debate on the same topic wrapped up the conference.